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T7_FR_Highperforming_22

T7_FR_Highperforming_22

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03/18/2014

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I
Joseph F. Michlitsch
Joseph Michlitsch is an associate professor of management at Southern Illinois University Edwardsville, where he
teaches strategic management. Dr Michlitsch consults in the areas of strategy formulation and strategy implementation
for businesses and not-for-profit organizations.
AbstractStrategy implementation is best accomplished through
high-performing people. Every organization must develop and retain

its high-performing employees who are focused on giving target
customers what they want. Key performance factors are explored
including clear mission and strategy, selection and training,
corporate culture, communications and information, and rewards.

KeywordsStrategy, High-fliers, Employee relations,
Corporate Culture, Loyalty
t is obvious that every company needs a mission
and strategy that are right for its customers and its
owners/stockholders. By identifying target
customers and giving them what they want, the company
will be successful in the long run, and owners will
benefit. However, this conclusion assumes that the
overarching strategy is being well implemented.

Herein lies a dilemma. While a company's leaders
may devise the strategy, it is employees \u00b1 all of them \u00b1
who will implement the strategy. It is ironic that, even
though more people now agree that employees are
important, company leadership continues to focus on

only some of its employees \u00b1 the managers. There still is

a wide separation between managers and the rest of the
employees, reinforcing an ``us and them'' attitude.
Managers often have private dining rooms; employees
do not. Managers sometimes get stock options;

employees do not. Managers get bonuses; employees do
not. Successful implementation of strategy requires a
rethinking of this dichotomous paradigm.
Strategy & Leadership 28,6 2000, pp. 28-33,# MCB University Press, 1087-8572
2 8
The importance of high-performing, loyal employees
Chief executive officers like Herb Kelleher at Southwest
Airlines and Fred Smith at Federal Express have been
quoted as saying something like, ``Our people come first,

even before our customers.'' They can hold this belief
because they know their employees take care of
customers in the ``right way'' \u00b1 they understand what

customers want and deliver it. This completes the circle.
A company must develop long-term relationships that

are profitable for both the customers and the company. It is essential that employees be able and willing to foster these relationships over time.

Employees who do this are valuable and, hopefully,
loyal. They like their jobs and plan to stay with the
company. Some turnover is desirable, of course, as it
removes those who are not able or willing to serve
customers as the strategy requires. For example, Cisco

Systems trims the bottom 5 percent of its employees each year. The ones who go are those who do not add value (based on objective performance measures) or do not fit the culture. At Southwest Airlines and Nucor Steel,

people who do not perform well or do not fit the culture
leave either voluntarily or are forced out by peer pressure.

Cultivating loyal employees who serve customers well is financially sound. Studies have shown that companies that emphasize developing and retaining employees have better results than companies that do not. They have

higher stock price to book value ratios, market values per
employee that are $41,000 higher, five-year annual
returns of 27.5 percent compared to 17.3 percent, and a
higher five-year survival rate of initial public
offerings[1,2].

There is other evidence that loyal employees add to the value of a company. Attracting and retaining the very best people is one of the eight most important things that

investors use when judging the value of a company,
according to research by Ernst & Young. Looking at it
from the other side, over 50 percent of the respondents
in a Mercer Management Consulting study said that
poor customer service and lost customers are the result
of not being able to attract and retain the right people.

From a broader perspective, Andersen Consulting found
that three-fourths of the executives it surveyed listed

human performance as more important strategically
than productivity and technology. Attracting and
retaining people will be the No. 1 issue in strategy by
2010, according to 80 percent of these managers.
Internet companies say that attracting and retaining the
right people is the primary issue for them already[3].

Contributing to the increasing importance of, and

difficulty in, attracting and retaining the right people is the decreasing loyalty and commitment of employees in every age, income group, job classification, and industry. Loyalty, or commitment to the company, has been

decreasing through the 1990s. In a 1998 study, 25
percent of US workers said they would leave their

companies for as little as 10 percent more pay. More
than 50 percent would leave if they could earn a 20
percent increase. These data indicate all-time lows in
company loyalty, which is mostly attributable to people

believing that they are working more but enjoying it less.
An America@Work study from 1995 to 1998 found
that[4]:
^the percentage of employees working more than 50
hours per week doubled, rising from 13 percent to
26 percent;
^the percentage of employees reporting burnout rose
from 39 percent to 53 percent;
^the average number of workdays lost to job-related
stress rose by 36 percent, from 1.1 to 1.5 days per
year; and
^over the past three years, workdays lost to care for
children or elderly people because daycare was not
available rose from 3.5 to 4.6 days.
In light of these data, how can you build a workforce that
is valuable and loyal? There are many factors, strategies,

tools and behaviors that interact to create high-
performing, loyal employees. Key among them are:
mission and strategy, selection and training, company
culture, communication and information, and rewards.
With the right mix of these factors, you can develop a
workforce that has the skills and commitment to help
your company succeed (see Exhibit 1).

Mission and strategy
In his book,The Loyalty Effect, Frederick Reichheld
makes a compelling argument for the indispensable
Strategy & Leadership 28,6 2000
Exhibit 1 \u00d0 Developing high-performance loyal
employees
2 9
interaction among loyal customers, loyal employees, and
loyal investors/owners[5]. The foundation for these
interactions is creating value for customers \u00b1 selecting a
good target market and turning that market into loyal
customers by understanding what they want and then by
delivering it better than anyone else. This means
developing and implementing the right mission and
strategy.
It is clear that successfully implemented strategy will,

in the long run, result in attractive financial returns,
hence loyal investors. However, this factor is also
inextricably connected to having committed, high-
performance employees.

A clear, compelling
mission and a strategy
backed by constancy of

purpose has a very
high probability of
being successful.
People prefer to work
for companies that are

consistently successful.

It gives them
satisfaction to be a part
of that success. A clear
mission and strategy
also help employees to
better understand their

roles in implementation.

Goals are easier to set,
and accountability for
individual and team
goals is easier to
establish and monitor.

The America@Work
study concluded that a
company's ability to
stay competitive, or
become more

competitive, is a major factor in increasing the commitment of employees. There usually are positive financial outcomes for employees if a company continues to be competitive and successful. If employees are allowed to use their skills and to participate in making the changes that maintain

competitiveness, personal development and increased
motivation will result.

There are many examples of companies that have been able to get everything right and have achieved a long-term ROI way above industry averages: Lexus,

MBNA Bank, Chick-fil-A, Leo Burnett, A.G. Edwards,
Southwest Airlines, Wal-Mart, Dell Computer,
Starbucks Coffee, and Federal Express.
Selection and training
For a company to be successful, it must have the ``right''
people. That means attracting them, training them, and
developing them over time. But the first step is to define
what ``right'' people means for a given company.

Companies like Southwest Airlines, Dell Computer, and Enterprise Rent-A-Car have done much research to determine what it takes to succeed within their

companies. In addition to functional and technical skills, these companies identify the personal characteristics and interpersonal skills that are related to success. Among other things, Southwest Airlines employees must be

creative and thrive in a team atmosphere. Employees at Dell Computer must be able to work well on teams, have a high tolerance for ambiguity and change, and be able to learn rapidly. Enterprise Rent-A-Car uses an

``enterprise quotient,'' or
EQ, to test for emotional

intelligence. The 15-
item EQ uses situational
questions to assess self-
awareness, persistence,
and empathy. Supplies
Network, a very
successful and growing

wholesaler of supplies for
printers and copiers,
wants its new hires to be
``extroverted, so they will

pick up the phone and
initiate a conversation
[with customers];
impatient, so they will
ask for the sale; [and]
non-conformist, so they

will be creative in solving
customers'
problems''[6].

Interestingly, the
companies mentioned
here, plus many others,
including Microsoft,

Anheuser-Busch, IBM, and Nordstrom, all have a
reputation for being successful financially as well as
having a distinct, strong, company culture. This kind of

a reputation goes a long way in attracting the people
these companies want. Because these companies have
clearly defined mission and strategy and understand
what it takes to succeed, they can identify and recruit
candidates more successfully.

Pay is usually relatively good at these companies; if
not beginning pay, then opportunities for advancement
are available and pay is tied to performance, so a new
hire can earn significant total compensation. For

example, new hires at Enterprise Rent-A-Car start with a
relatively low salary of about $25,000. Then they are
given opportunities to make decisions and are rewarded
for their performance. It is common for a new hire to be
Strategy & Leadership 28,6 2000

``It is ironic
that, even though more
people now agree that employees
are important, company leadership
continues to focus on only some
of its employees \u00b1 the

managers.''
3 0

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